Scenario 21-3
Zach knows that he will ultimately face retirement. Assume that Zach will experience two periods in his life, one in which he works and earns income, and one in which he is retired and earns no income. Zach can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings.
-Refer to Scenario 21-3.Assume that Zach decides to consume $100,000 in the work period.How much money will he have available for consumption in his retirement period?
A) $100,000
B) $110,000
C) $150,000
D) $165,000

Question

Quizplus · Accepted Answer

If Zach consumes $100,000 in the work period, he will save $150,000 ($250,000 - $100,000). At a 10% interest rate, this will grow to $165,000 at the end of his working period. Therefore, Zach will have $165,000 available for consumption in his retirement period.

Scenario 21-3 Zach Knows That He Will Ultimately Face Retirement. Assume That